According to the latest developments, GAIL, India’s largest gas supplier, announced that it is open to buy Russian oil and gas assets avoided by Western companies after Moscow’s invasion of Ukraine. While European countries and the United States of America (USA) have imposed heavy sanctions on Russia since Moscow sent troops to Ukraine on February 24, 2022, India tried to balance its ties with Russia and the West, unlike other members of the Quad countries (USA, Japan and Australia); it did not impose sanctions on Russia. Currently, GAIL plans to purchase gas to meet growing domestic natural gas demand, including through long-term liquefied natural gas (LNG) import agreements with global companies. It is known that GAIL is exploring a 10-year agreement to import 1 million tons of LNG annually. In this context, GAIL has a long-term gas import agreement with Gazprom Marketing & Trading Singapore to purchase an average of 2.5 million tons per year. According to the agreement, Gazprom gradually increased its supply to GAIL, delivering 2 million tons of LNG in 2021. It is estimated that the supply will increase to 2.5 million tons in 2022 and to 2.85 million tons in 2023 [Verma, 2022].
India is the third largest energy-consuming country in the world, thanks to rising incomes and improving living standards, after China and the USA. The country’s energy use has doubled since 2000, with 80% of demand is still being met by coal, oil and solid biomass. It is estimated that India will soon become the most populated country in the world, adding a city equivalent to the size of Los Angeles to its urban population each year. In this context, according to experts, to meet the increase in electricity demand in the next two decades, India needs to add a power system the size of the European Union to what it currently has. Therefore in this direction, India also needs to increase its renewable energy capacity by 4 times by 2030, and make huge investments in strengthening its energy infrastructure, energy storage and energy efficiency [IEA.org, 2021].
The fact that India with the fastest and largest urbanization in the world and with a huge industrialization will be the most populous country in the world in the near future, makes India where the energy demand will increase the most in the world until 2040. According to data, 270 million Indians are expected to migrate to cities in the next 20 years [Comtois, 2022].
Coal’s share in India’s energy portfolio was 44% in 2019, which is expected to drop to 34% in 2040. The energy demand of the transport sector is expected to more than double by 2040, with 25 million new trucks on the roads in the next 20 years. By 2040, 300 million vehicles will be on the road in India [BP.com, 2021; EA.org, 2021].
Natural gas accounts for 6% of India’s energy portfolio, the lowest rate in the world. But over the next 20 years, India’s gas consumption is expected to more than double its share of the overall energy portfolio.
India’s imported fossil fuel bill is projected to more than triple over the next 20 years. By 2040, the country’s dependence on imported oil is expected to reach 90% and carbon emissions are expected to increase by 50% in 2040. Although the carbon emission rate per capita is still below the world average, India will be the country that will emit the most carbon into the atmosphere by 2040. The Indian government is planning to spend $1.4 trillion on clean energy and clean energy technologies by 2040. India alone accounts for 10% of the increase in global energy demand since 2000. The country’s energy demand has increased by 60% since 2000. In the 2015-2019 periods, there was a 58 GW of coal capacity increase and 49 GW of solar and wind power capacity increase [IEA.org, 2021].
India to meet its huge energy needs has made a tremendous breakthrough in renewable energy sources. Today, 18% of India’s electricity needs are met from solar and wind energy, and 70% from coal. However, it seems difficult for renewable energy sources to meet the increasing energy demand. The share of solar and wind energy in India’s total energy consumption is 4%. If India’s anticipated ambitious renewable energy plan is put into action in line with investments, it is expected that 30% of India’s electricity needs will be met from solar energy by 2040. In this process, it is foreseen that India will surpass China by far in installed solar energy capacity. India is expected to reach 450 GW of renewable energy capacity by 2030 [Ibef.org, 2022].
According to some experts, much has been said and continues to be said about India’s transition to clean energy. According to IEA, India has to spend more than $1.4 trillion to transition to clean energy, which even divided over 20 years, would equal $70 billion a year, 70% more than India’s current policy requires. That’s why these plans and goals seem to be difficult to complete [Wald, 2021]. Increasing the use of natural gas to replace the use of coal, waste and biofuels will reduce emissions in India. In fact, India seemed poised to increase its use of natural gas when three Indian companies entered a consortium with Iran in 2008 to develop an offshore gas field in the Persian Gulf. The relationship reportedly ended recently as India was forced to delay the work due to US sanctions. If these sanctions are lifted by President Joe Biden’s administration, it is possible for Indian companies to continue working with Iran and bring more natural gas to India [Wald, 2021].
In this context, considering India’s growing industry and population, and the long and costly transition to renewable energy, it can be predicted that natural gas may be used instead of coal. The West’s plan to abandon Russian natural gas by imposing sanctions against Russia may be an option for India to meet its energy demand from Russia via LNG. This energy cooperation can be good for Russia, which is in search of an alternative market to export its natural resources instead of the European market, and for India, which wants to reduce the use of coal and turn to renewable energy. The latest developments regarding the increase in LNG purchases between India and Russia and the above-mentioned statistical data of India are a harbinger of the further development and continuation of this cooperation. In addition, it is highly likely that we will see India’s energy cooperation developments with other energy-rich countries besides Russia in the future. For example, it is highly possible that India will develop its relationship with energy-rich countries such as Iran and Turkmenistan through LNG and pipeline, and support and take part in Turkmenistan-Afghanistan-Pakistan-Iran and similar pipeline projects.
References:
BP.com (2021). Statistical Review of World Energy. Retrieved from https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2021-india-insights.pdf. Accessed on 21.07.2022.
Comtois J. (2022). India Projected to Become World’s Most Populous Country. Retrieved from https://etfdb.com/emerging-markets-channel/india-projected-to-become-world-s-most-populous-country/#:~:text=India%20is%20projected%20to%20become,World%20Population%20Prospects%202022%20report. Accessed on 21.07.2022.
Ibef.org (2022). Renewable Energy Industry in India. Retrieved from https://www.ibef.org/industry/renewable-energy. Accessed on 21.07.2022.
IEA.org (2021). India Energy Outlook 2021. Retrieved from https://www.iea.org/reports/india-energy-outlook-2021. Accessed on 16.07.2022.
Verma N. (2022). India’s GAIL Open to Buying Russian Oil and Gas Assets. Retrieved from https://www.reuters.com/markets/europe/indias-gail-open-buying-russian-oil-gas-assets-chair-says-2022-05-27/. Accessed on 16.07.2022.
Wald E. (2021). Pay Attention to India’s Energy Consumption for the Future of Demand in the Oil Market. Retrieved from https://tr.investing.com/analysis/petrol-piyasasnda-talebin-gelecegi-mi-hindistann-enerji-tuketimine-dikkat-edin-200466626. Accessed on 16.07.2022.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.